Taking out a Cash Advance: Essential things to know

Most people find that they need to pay for something but their credit card just isn’t an option. Whether it is an emergency taxi ride or perhaps a trip to your local farmer’s market, sometimes cash is the only form of payment accepted. What happens when you need to pay for something but you can’t use your card and don’t have enough money in your checking account to cover the expense? Another option you have when it comes to getting some fast cash is to take a cash advance out on your credit card.

What exactly is a ‘Cash Advance’?

Cash advances are basically just short-term loans that you can take out against your credit card up to a certain amount. Unlike when you make a purchase with a credit card directly, you are taking the loan in the form of cash. You can do this by going to a ATM or bank, where you will use your credit card, as opposed to your debit card, to get the cash you need.

You will need to keep in mind that most credit card companies will not let you take the whole amount of your credit limit as a cash advance. These advances usually come with a limit of just a few hundred dollars for most people. This means that you should not rely on your credit card to provide you with a lot of money when there is an emergency of some kind.

The Cost of a Cash Advance

While it is true that getting a cash advance is pretty easy and simple, it can be fairly costly. Before you actually go through with getting a cash advance from your credit card, you will need to keep in mind that there are a number of different fees and expenses involves. Every single time you take a cash advance, you are going to be charged a cash advance fee. This is usually anywhere from two to five percent of the amount of the advance. Unless you take a loan via someone like Omacl.co.uk of course.

When to take out a cash advance

Ideally, you should only take out a cash advance on your credit card if you really need the money. If your car has broken down and you need a taxi ride or you’re in some other sort of desperate situation, a cash advance can be a great thing. It is important that you do not get into the habit of taking out cash advances on your credit card.

How to Limit Fees associated with a Cash Advance

There are a number of different ways to go about limiting the fees associated with a cash advance, and it is important that you know what some of them are. Some transaction fees are simply a percentage of the overall advance, in which case you could limit the fee by withdrawing only what you need and not more. Other transactions fees may be a flat rate, in which cause you should take all the cash you think you night need at once.

Unlike with direct credit card purchases where there is a grace period between the purchase and the payment due date, cash advances begin accruing interest right away. This means that you will definitely need to make a point of paying off your cash advance as quickly as possible. Otherwise you are going to end up spending a lot more than you need to.

Should you take out a cash advance?

It is very important that you take the time to think about whether or not you should take out a cash advance at all, as there are other options to explore. You can always try asking a friend or family member for the money you need. While it’s true that a cash advance on your credit card can be very helpful in many situations, it can also be quite costly. The longer you take to pay back the advance, the more you will spend due to compound interest. A lot of people get credit card cash advances, but many of them regret it due to all of the fees. It is highly recommended that you carefully consider all of your options before making a final decision.